Switzerland

The Treasury Department planted a "dirty bomb" at the Bank of Japan, and tossed a grenade at the Swiss National Bank.

As Cyprus has shown us, when push comes to shove, rule of law goes out the window. I fully expect that when things get really bad in the financial system the money grabs will come fast and furious. Foreign accounts, including possibly even Gold held aboard, will come under attack. Heck, the US got Switzerland to throw its 300-year-old banking secrecy out the window…

In a wide-ranging interview with Casey Research editor Louis James, Doug Casey discusses why it's imperative to start diversifying one's assets today, and provides some guidance in considering countries to diversify into... "I'm sure they'll get 'round to closing all the loopholes. So, the time to act is now. We'll keep monitoring the situation, but when this happens, the Powers that Be won't want anyone to see it coming, so it will zing in from left field. Your only chance to protect your wealth is to start diversifying its exposure to any one particular predatory state as soon as possible."

As of later this month, we’ll receive the final picture on China’s U.S. bond sales over late 2011 and early 2012, and the reaction isn’t likely to be much different than it was last year. But, we argue that there’s actually quite a lot to see. Namely, there’s a brand new reason to be concerned about America’s access to foreign capital. In a nutshell, America needs foreigners to be both willing and able to buy its bonds. China is able but much less willing than it used to be. (Treasury data that isn’t shown here suggests its interest in U.S. securities recovered somewhat in late 2012, but remains far short of the levels of two years ago.) Other countries are willing but not nearly as able as China, notwithstanding the sharp increase in purchases in the recent period. And overall, the message in the preliminary TIC data is more worrisome than it may appear on the surface. Should the final report on April 30th confirm the message, consider it a warning of a potentially disastrous future decline in foreign purchases of U.S. debt.

April 5th, 1933, FDR confiscated every gold coin, bar, or certificate and people had to turn in their gold to the Federal Government or else they would face a fine of $10,000 or 10 years in jail. That is about $179,000 in today’s money.  You were able to keep a small amount or some rare coins and those that did give up their gold received about $20/oz.  “Why would the government do that?” asks Ms. Steel.  They did this for the following reasons:

1. To prevent hoarding.
2. To devalue the dollar during the Great Depression.
3. The government set the gold price at $35/oz and pegged it to the dollar.

“But this could never happen again, right?” asks Ms. Steel. “Well tell that to Texas.” 

So much for the "transformational" CEO, poached from AAPL and credited with creating the AAPL retail mystique. As per CNBC, he now effectively "out":

J.C. PENNEY TO OUST RON JOHNSON AS CEO: CNBC
J.C. PENNEY'S CEO JOHNSON `IS OUT': CNBC

At least he lasted just a bit longer than the former JCP president Mike Francis, who came, saw, collected $10 million, and quit nine months later.

Despite the ever-levitating nominal levels of Japanese stocks, and relative stability of European peripheral bonds, it appears the demand for 'safe-havens' is very high. Swiss 2Y interest rates just plunged to their lowest in almost 3 months at -4.7bps. It seems that even with the possibility of depositor haircuts, savers are more comfortable stashing their hard-earned cash in Switzerland than in high-beta US equities. This is the biggest 2-day drop in rates since Cyprus.

“I need to hire more people, but the government won’t let me”

Witches Brew: Part 4 - Reality Bites

• The Specter of Things to Come

The road to ruin is on plain display and the playbook is easily seen at this juncture. Let’s take a look at how that playbook will unfold. Contrary to popular outrage of the SOLUTION being IMPOSED it is the correct one once the insured depositors where PROTECTED.  In this edition the elites suffered FIRST followed by the private sector depositors who foolishly believed false BALANCE sheets which were POLITICALLY CORRECT but PRACTICALLY incorrect fictions approved by fiduciarily (regulations and regulators allowed ONGOING insolvent operations rather than protect the public by ending and prohibiting them) challenged governments (work for the banks and crony capitalists not for the public at large).

A cache of 2.5 million files of cash transfers, incorporation dates, and links between companies and individuals has cracked open the secrets of more than 120,000 offshore companies and trusts. The secret records obtained by the International Consortium of Investigative Journalists (ICIJ) lay bare the names behind covert companies used by people from American doctors to Russian executives and international arms dealers in more than 170 countries (as shown in the map below). One wonders how and why this sudden (and timely) leak of documents occurred. If we were a tinfoil-hat-wearing conspiracy theorist we might suspect that this is a staged coup to create a witch-hunt against all offshore capital (legitimate or illegitimate) - and an attempt, as with Cyprus, to push money out of banks and into circulation (pushing the velocity up) as all other monetary policy 'tricks' have failed. While 'offshore' is synonymous with 'tax cheat', there is nothing illegal in moving assets offshore. In fact, as Simon Black notes, given that there is going to come a time, likely soon, that retirement savings will be targeted; diversifying abroad is one of the sanest things you can do to protect yourself against the real criminals.

While the head of the ECB and his assorted kitchen sinks scramble to explain how Diesel-BOOM was horribly misunderstood when saying that depositor impairment may and will be the template for future European bank "resolution" (as should have been the case from Day 1), the CEO of Italy's largest bank appears to have missed the memo. As Bloomberg reports, according to the chief executive Federico Ghizzoni, "uninsured deposits could be used in future bank failures provided global rulemakers agree on a common approach." Or failing that, because if Cyprus taught us anything is that Europe will never have a common approach on anything, just use deposits as impairable liabilities, period, once the day of reckoning for Non-Performing Loans comes and these are forced to be remarked to reality, just as happened in Cyprus. One can only hope that uninsured deposits do not represent a substantial portion of the bank's balance sheet because the CEO basically just told them they are next if when risk comes back to the Eurozone with a vengeance. Especially since as Mario Draghi was so helpful in pointing out, "there is no Plan B."

The $13 billion bailout in Cyprus is small (in 2011, France and Germany made $80 billion of loans and grants to developing countries) and as JPMorgan's CIO, Michael Cembalest, notes the situation is in many ways unique. However, he warns, the latest melodrama reinforces the inconsistent and chaotic nature of EU policy-making. Bondholders, equity investors, bank depositors and citizens of Europe are at risk of unpredictable outcomes as they play Eurozone Roulette. Here’s where they might land on any given spin...

Gold rose 1.1% in March, its first monthly rise in six. 

For the quarter, gold was 4.5% lower in dollar terms and 1.4% lower in euros. However, signalling that the demise of gold is greatly exaggerated, gold is 3.7% higher in Japanese yen and 2.6% higher in sterling.

As one astute financial journalist said to me “ ‘cash in the bank’ doesn’t have quite the same ring to it anymore.”

Something rather notable appears to have changed in Europe in the last week. Since the global financial crisis exploded five years ago, each significant risk-flare has seen money flow rapidly into Swiss short-dated bonds (the so-called safe-haven trade) and has often driven these rates significantly negative. However, the current debacle is exhibiting a very different picture. Whether it is concern (as we noted here) that Switzerland will be next for a 'wealth tax' or simply a market's recognition of where the 'only' safe-haven truly exists in Europe, investors have surged into short-dated German Bunds (and not Swiss) - driving the yield on these bonds below Swiss 2Y.

An increase in safe haven demand, particularly in periphery European nations such Spain and Italy will likely support gold. Citizens in these countries are alarmed by how depositors in Cyprus were treated and the more aware and prudent ones are taking the requisite action in order to protect their families and businesses from the growing possibility of capital controls.

Whether to sell Italy's national gold reserves is an interesting question. A perhaps as interesting question and more important question in the light of the Troika expropriation of bank deposits is will Italians begin to diversify some of their savings in Italian banks into gold bullion?